Consider the following demand schedule: Points: A B C D E Income (RS): 10000 20000 30000 40000 50000 Demand (Units): 200 400 600 800 1000 a) Compute…
BBS Microeconomics for Business · 2080 · Solved Question with Answer
Consider the following demand schedule:
| Points: | A | B | C | D | E |
| Income (RS): | 10000 | 20000 | 30000 | 40000 | 50000 |
| Demand (Units): | 200 | 400 | 600 | 800 | 1000 |
a) Compute the income elasticity of demand at movement from B to D and D to B by proportion method
b) Compute the income elasticity of demand at midway between B and D and D and B by arc method. Why is arc method considered as more appropriate method than proportion method?
c) How do firm use price elasticity of demand in business decision making? Explain with suitable examples.